The Ultimate Beginner's Guide To Investing In

The Ultimate Beginner's Guide toInvesting inETFsbetashares.com.au

The Ultimate Beginner’s Guide to Investing in ETFsINTRODUCTIONIf you’re interested in getting a start in investing, then Exchange TradedFunds, or ETFs, may be a great place for you to begin.Once you have a basic understanding of ETFs, you’ll find they’re a moreaccessible and convenient way to participate in the sharemarket, andusually at a substantially lower cost than some other investment methods.The first step, of course, is to understand what an ETF is.BetaShares 2

The Ultimate Beginner’s Guide to Investing in ETFsTABLE OFCONTENTSWHAT IS AN ETF, AND WHY SHOULD I CARE?04HOW TO START INVESTING IN ETFS07WHAT YOU SHOULD LOOK FOR IN AN ETF094 TIPS FOR TRADING ETFS11WHAT ARE YOU WAITING FOR? GET INVESTING!13BetaShares 3

The Ultimate Beginner’s Guide to Investing in ETFsWHAT IS ANETF, AND WHYSHOULD ICARE?BetaShares 4

The Ultimate Beginner’s Guide to Investing in ETFsAn ETF is an open-ended investment fund, similar to a traditional managedfund, that is traded on the ASX – just like any share. ETFs aim to closelytrack the performance of a given index or asset class, and provide thereturns of that index or asset class – less any fees.But why should someone just starting out their investment journey belooking at ETFs? There are a number of important advantages of ETFs,particularly for less experienced investors, but the four most important are:ETFs can also coverasset classes, otherthan shares, such asgold or bonds.THEY’RE SIMPLEInvest in shares the conventional way and you could be looking at acomplicated choice when it comes to deciding on which particularcompany, sector and geographic region to invest in.On the other hand, ETFs are typically designed to track a wholesharemarket index, such as the Top Australian 200 Stocks, which meanswith one simple trade you are getting exposure to a whole market.THEY’RE COST-EFFECTIVEETFs track the performance of the overall index (such as, say, the USsharemarket) or asset class (such as gold). As a result of this “passive”approach, the investor benefits as the ETF manager incurs lower costsin managing the portfolio, and so does not need to pass on the moreexpensive fees that are usually incurred in having someone “actively”manage the portfolio.On average, the costs of ETFs are usually less than half the cost of acomparable traditional managed fund.According to Morningstar, which is a research anddata provider, the average fee for an active Australianshare fund is 1.37% p.a. while a comparable ETF fee is0.33% p.a.In addition, ETF fund managers require no minimum investment amount,which means you can start investing with relatively small sums of money.BetaShares 5

The Ultimate Beginner’s Guide to Investing in ETFsLIQUIDITYYou can buy and sell ETFs on the Australian Securities Exchange (ASX)just as you would any listed shares during the trading day. This makesthem a convenient way to trade in comparison to some other off-marketoptions.CAN REDUCE THE RISK ACROSS YOURPORTFOLIOThis diversificationMany investors who are considering investing for the first time mightmeans that ‘singleconsider buying a handful of shares. This means that their investment willstock’ risk isbe concentrated and they will be significantly exposed to the investmentsubstantially reduced.performance of a small number of companies.By comparison, ETFs which aim to track sharemarkets give investorsinstant exposure to a diversified set of companies, say 200 in the case ofbroad Australian sharemarket ETFs.Where can I get a whole lot more information on tradingin ETFs?David Bassanese, (who also happens to be BetaShares' ChiefEconomist), has written an authoritative guide to investing inETFs for Australians. The book is called The Australian ETFGuide – How To Invest More Cheaply, Simply And EffectivelyUsing Exchange Traded Funds (ETFs) . It’s a straightforward,easy to read, in-depth guide to ETFs.You can also check out our blog and, in particular, the“BetaShares Academy” section which contains more basicinformation on ETFs – see tashares-academy/BetaShares 6

The Ultimate Beginner’s Guide to Investing in ETFsHOW TO STARTINVESTING INETFSBetaShares 7

The Ultimate Beginner’s Guide to Investing in ETFsIf the benefits of investing in ETFs sound good to you, then the next stepis to decide what types of ETFs you might want to invest in. ETFs havebeen set up to cover a wide range of different sectors and geographies,You can do somebe they bonds, commodities, or an entire sharemarket index, such as theresearch and find thatNASDAQ-100 in the U.S.there are many optionsavailable, such as suchETFs are also now available on specific investment themes. For example,as CommSec, Bellif you believe that companies which are in the global cybersecurityDirect, NabTrade andsector may perform well, you might be interested in investing in an ETFCMC Markets. Find thethat focuses specifically on that. If you see an opportunity in the globalone that suits you best.technology leaders, such as Amazon or Facebook, then investing in aNASDAQ-100 ETF may be interesting to you. Or if you are looking formore stable, steady returns from fixed income, then bonds or cash fundsmight be where the opportunities lie for you.ETFs are bought and sold exactly like shares, so there’s no need to opena separate broking account if you already have one. The ASX ticker forthe fund is used to buy and sell, without the need for any additionalpaperwork. If you have never bought or sold shares, you most probablywon’t have the brokerage account you need to trade ETFs so you willneed to open one.How much do I need to start trading in ETFs?This is actually one of the biggest strengths of ETFs forbeginner investors; the initial investment is not intimidatingin the slightest – and you may typically start with as little as 500. Where some other forms of investment might requirea significant upfront amount, there is no minimum upfrontrequirement beyond what might be stipulated by yourbroker (which is typically 500).That makes ETFs a great way for a person to “dip their toein” and get started in investing.BetaShares 8

The Ultimate Beginner’s Guide to Investing in ETFsWHAT YOUSHOULD LOOKFOR IN AN ETFBetaShares 9

The Ultimate Beginner’s Guide to Investing in ETFsThere are a lot of ETFs on the market, and they’re not all created equal.While it is important to find an investment that will help you meet your financial objectives, there are a couple ofkey things to keep in mind when looking for ETFs (and we are very confident that you’ll like what you see when youresearch BetaShares ETFs): Expense Ratio The provider itself DiversityAll ETFs will publish an ExpenseWe deal in a competitive space,One of the benefits of an ETF isRatio. This is an annual cost,and not all competitors are equal.that it gives you a convenient andexpressed as a percentage, thatIf you’re genuinely using ETFs as aeasy-to-manage way of buildingcovers the fund management fees,way of building your wealth, you’rediversity into your share portfolio. Inadministrative fees and other fundgoing to want a provider that’sthe often volatile market conditionsoperating costs. For example, areliable and experienced, and hasthat we face, diversification orfund with an Expense Ratio ofa proven track record. Choosing“not putting all your eggs in one0.45% p.a. means that youran investment that meets yourbasket” can be one of the strongestinvestment will cost you 4.50 forneeds along with a client-focusseddefences.every 1000 you have investedprovider, such as BetaShares, thatannually.is committed to education andproduct innovation, may be theperfect match.What risks should I be aware of when it comes to ETFs?One of the principal risks of an ETF is that its performance is tied to the underlying assets on which itis based. So, for example, if you choose an ETF based on the S&P/ASX 200 Index, and then thewhole market suffers a dip, your investment will see a decline in value. These are the risks associatedwith investing - refer to the relevant Product Disclosure Statement (PDS) for information about risks.Importantly, ETFs are regulated unit trusts, which means that they have the same legal structure astraditional managed funds, and that means that in the unlikely event that your product issuer suffersfinancial difficulty, the ETF’s assets are held for the benefit of investors and will not be available to thecreditors of the issuer.BetaShares 10

The Ultimate Beginner’s Guide to Investing in ETFs4 TIPS FORTRADING ETFSBetaShares 11

The Ultimate Beginner’s Guide to Investing in ETFsBelow is a summary of the top four tips for making the most of your ETF investment strategy. You can read moreabout each of these tips (and more), in our article on the subject here.1.Always refer to iNAV when placingan order3. Remember that on-screen tradingvolume is not an indicator of liquidityOne of the greatest benefits of ETFs is theirIf an ETF hasn’t traded much during the day, but youtransparency; by using what is known as the “iNAV” orwant to purchase or sell units, you can still do so, whichindicative net asset value you can, for many ETFs, getis a fundamental difference (and advantage) ETFs havean estimate of the “fair value” of the fund in real timecompared to standard stocks.through the trading day.Read more about this here: https://www.betashares.You can use this data to get a more accurate sense ofcom.au/insights/understanding-etf-liquidity/the value of your investments and make better purchaseor sale decisions.2.Use a limit order4. Avoid trading in the first and last 10minutes of the dayWhen trading through your online broker, after lookingat the iNAV (where available), you will then be able toDuring the first and last 10 minutes of the trading day,make better decisions about the price that you want towhen the markets are opening and closing, in general,buy and sell at.there can be less information available with which tovalue certain shares or there can be a lot more volatilityYou don’t have to set a price limit to purchase ETFs(known as a “limit order”), but it’s strongly advised todo so, as in a volatile market, a number of factors canin share prices.In this situation, the market maker's spreads may tendcome together that can either drop the sale price orto be wider and the iNav may be based on a price thatraise the buy price beyond what you’re comfortablecan move significantly within a minute or two.with by the time that your order has been placed andfulfilled.You should, therefore, consider trading the ETF whenstocks have settled down, usually 10 minutes after theLimit orders can prevent this from happening.BetaShares 12markets open to 10 minutes before they close.

The Ultimate Beginner’s Guide to Investing in ETFsWHAT AREYOU WAITINGFOR? GETINVESTING!BetaShares 13

ETFs are an attractive way for newcomers to sharemarket investing to get a sense forinvestment, and to start building their wealth. They’re easy-to-use, cost-effective andversatile investment options, and their diversification is a critical benefit not justwhen you’re making investments for your wealth now, but in the longer term, too.betashares.com.au FOLLOW USIMPORTANT INFORMATIONBetaShares Capital Limited (ACN 139 566 868 / AFS Licence 341181) is the Responsible Entity and product issuer. Theinformation on this website is general information only and we have not taken your individual circumstances, financial objectivesor needs into account when preparing the above information so it may not be applicable to your circumstances. You shouldconsider your circumstances and the relevant PDS and obtain professional financial advice before making any investmentdecision.You can access our PDS on this website or by calling us on 1300 487 577.

The Ultimate Beginner’s Guide to Investing in ETFs Invest in shares the conventional way and you could be looking at a complicated choice when it comes to deciding on which particular company, sector and geographic region to invest in. On the